Global miner Rio Tinto has recommended shareholders vote against forcing it to set targets around the emissions of its steel-making customers, putting it on a collision course with investors over its climate policies.
Investors have been pushing for corporate giants to cut back their emissions as part of a wider drive to keep temperatures below a 2 degree maximum rise as outlined in the Paris climate accord.
Rio Tinto, which makes around 85 per cent of its profits from sales of iron ore, has come under increasing pressure given its huge exposure to the steel industry, one of the world’s heaviest polluters.
Friends of the Earth unit Market Forces, alongside other investors, proposed a resolution to require Rio Tinto to set targets for its customers, called scope three emissions, which Rio Tinto recommended shareholders vote against.
“It is extremely problematic for the mining industry to set targets for the steel industry,” chairman Simon Thompson said.
“What Market Forces is asking us to do is set measures for a process we do not control and where we cannot even measure the starting point, never mind any improvement.”
The resolution is expected to fail, as was the case when BHP Group recommended shareholders vote against a similar climate change-related resolution last year, however a large vote against the board’s recommendation has kept the issue in sharp focus.
Rio late last year set targets to reach zero emissions by 2050, to cut emissions intensity by 30 per cent and absolute emissions by 15 per cent by 2030.
BHP and Vale have pledged to set scope three goals, but Australia’s Fortescue has also refused. One way for Rio to cut emissions would be to close its Australian aluminium operations that are fuelled by coal-fired power after it put the loss-making business under review last year.
Rio Tinto is still in discussions with state and federal governments as well as power utilites to find a “commercial solution”.
“If we were at this stage to take more rapid unilateral action to reduce emissions, it would require the closure of some of our operations,” Thompson said.
Rio promotes itself as the only major miner that does not produce carbon since it sold off its coal assets, but it also drew criticism over plans to build a $US1 billion coal-fired power plant in Mongolia, to support its copper mine.
The new power plant, which it is required to build under its investment agreement with the Mongolian government, would be more efficient than buying coal-fuelled power from Chinese plants as it does now, Thompson said.
Thompson also refuted calls for Rio Tinto to quit the Minerals Council of Australia (MCA), despite acknowledging that the group’s advocacy has not always aligned with its climate policies.
Like BHP, Rio argues that change is easier from within. Thompson noted that MCA has since changed its processes, and has done good work promoting safety and coordinating the industry’s coronavirus response.